North Carolina | 56-1928817 | |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
170 Southport Drive | ||
Morrisville, North Carolina | 27560 | |
(Address of principal executive offices) | (Zip Code) |
Large accelerated filer | ☐ | Accelerated filer | ☐ |
Non-accelerated filer | ☐ (Do not check if a smaller reporting company) | Smaller reporting company |
Page Number | |||
PART I – FINANCIAL INFORMATION | |||
Item 1. | Financial Statements | ||
3 | |||
4 | |||
5 | |||
6 | |||
Item 2. | 22 | ||
Item 3. | 38 | ||
Item 4. | 38 | ||
PART II – OTHER INFORMATION | |||
Item 1. | 38 | ||
Item 1A. | 39 | ||
Item 6. | 40 | ||
41 |
June 30, 2015 (unaudited) | December 31, 2014 | June 30, 2016 (unaudited) | December 31, 2015 | |||||||||||||
ASSETS | ||||||||||||||||
Current assets: | ||||||||||||||||
Cash and cash equivalents | $ | 5,254,242 | $ | 4,007,341 | $ | 11,111,309 | $ | 5,274,305 | ||||||||
Accounts receivable, net | 4,462,286 | 5,510,253 | 2,228,545 | 3,852,651 | ||||||||||||
Inventory, net | 13,404,996 | 13,320,639 | 10,121,500 | 10,739,798 | ||||||||||||
Prepaid expenses and other assets | 905,306 | 602,850 | 922,035 | 701,105 | ||||||||||||
Assets related to discontinued operations | 750 | 83,000 | ||||||||||||||
Total current assets | 24,026,830 | 23,441,083 | 24,384,139 | 20,650,859 | ||||||||||||
Long-term assets: | ||||||||||||||||
Inventory, net | 21,124,138 | 25,617,990 | 15,961,283 | 21,588,622 | ||||||||||||
Property and equipment, net | 1,663,608 | 1,859,355 | 1,317,659 | 1,615,683 | ||||||||||||
Intangible assets, net | 172,895 | 216,947 | 5,564 | 71,086 | ||||||||||||
Other assets | 252,805 | 291,022 | 165,016 | 214,588 | ||||||||||||
Total long-term assets | 23,213,446 | 27,985,314 | 17,449,522 | 23,489,979 | ||||||||||||
TOTAL ASSETS | $ | 47,240,276 | $ | 51,426,397 | $ | 41,833,661 | $ | 44,140,838 | ||||||||
LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||||||||||
Current liabilities: | ||||||||||||||||
Accounts payable | $ | 3,314,133 | $ | 3,286,086 | $ | 3,062,700 | $ | 3,323,148 | ||||||||
Accrued cooperative advertising | 36,000 | 220,000 | - | 58,000 | ||||||||||||
Accrued expenses and other liabilities | 1,475,571 | 684,577 | 770,258 | 891,187 | ||||||||||||
Liabilities related to discontinued operations | 183,000 | 349,000 | ||||||||||||||
Total current liabilities | 4,825,704 | 4,190,663 | 4,015,958 | 4,621,335 | ||||||||||||
Long-term liabilities: | ||||||||||||||||
Accrued expenses and other liabilities | 763,260 | 809,879 | 655,867 | 710,223 | ||||||||||||
Accrued income taxes | 414,018 | 407,682 | 427,246 | 420,503 | ||||||||||||
Total long-term liabilities | 1,177,278 | 1,217,561 | 1,083,113 | 1,130,726 | ||||||||||||
Total liabilities | 6,002,982 | 5,408,224 | 5,099,071 | 5,752,061 | ||||||||||||
Commitments and contingencies | ||||||||||||||||
Shareholders’ equity: | ||||||||||||||||
Common stock, no par value | 54,240,247 | 53,949,001 | ||||||||||||||
Additional paid-in capital – stock-based compensation | 12,283,365 | 11,628,503 | ||||||||||||||
Common stock, no par value; 50,000,000 shares authorized; 21,507,235 and 21,111,585 shares issued and outstanding at June 30, 2016 and December 31, 2015, respectively | 54,243,816 | 54,240,247 | ||||||||||||||
Additional paid-in capital | 13,918,550 | 13,280,920 | ||||||||||||||
Accumulated deficit | (25,286,318 | ) | (19,559,331 | ) | (31,427,776 | ) | (29,132,390 | ) | ||||||||
Total shareholders’ equity | 41,237,294 | 46,018,173 | 36,734,590 | 38,388,777 | ||||||||||||
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY | $ | 47,240,276 | $ | 51,426,397 | $ | 41,833,661 | $ | 44,140,838 |
Three Months Ended June 30, | Six Months Ended June 30, | Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||||||||||||||||
2015 | 2014 | 2015 | 2014 | 2016 | 2015 | 2016 | 2015 | |||||||||||||||||||||||||
Net sales | $ | 7,476,872 | $ | 7,841,647 | $ | 15,853,936 | $ | 13,909,200 | $ | 6,527,004 | $ | 6,183,535 | $ | 17,920,275 | $ | 13,199,621 | ||||||||||||||||
Costs and expenses: | ||||||||||||||||||||||||||||||||
Cost of goods sold | 6,461,537 | 5,324,981 | 11,305,440 | 8,988,023 | 3,894,094 | 6,092,858 | 13,057,982 | 10,521,481 | ||||||||||||||||||||||||
Sales and marketing | 3,517,870 | 2,171,614 | 6,491,234 | 4,366,225 | 1,803,010 | 1,787,930 | 3,331,595 | 3,145,874 | ||||||||||||||||||||||||
General and administrative | 1,533,948 | 2,376,466 | 3,768,161 | 3,752,681 | 1,693,123 | 1,191,879 | 3,135,818 | 3,057,242 | ||||||||||||||||||||||||
Research and development | 7,043 | 9,514 | 9,104 | 11,501 | 980 | 7,043 | 2,848 | 9,104 | ||||||||||||||||||||||||
Loss on abandonment of assets | - | - | - | 2,201 | ||||||||||||||||||||||||||||
Total costs and expenses | 11,520,398 | 9,882,575 | 21,573,939 | 17,120,631 | 7,391,207 | 9,079,710 | 19,528,243 | 16,733,701 | ||||||||||||||||||||||||
Loss from operations | (4,043,526 | ) | (2,040,928 | ) | (5,720,003 | ) | (3,211,431 | ) | (864,203 | ) | (2,896,175 | ) | (1,607,968 | ) | (3,534,080 | ) | ||||||||||||||||
Other income (expense): | ||||||||||||||||||||||||||||||||
Interest income | - | 20 | 11 | 49 | - | - | - | 11 | ||||||||||||||||||||||||
Interest expense | (767 | ) | (188 | ) | (784 | ) | (318 | ) | (5 | ) | (767 | ) | (1,512 | ) | (784 | ) | ||||||||||||||||
Loss on abandonment of property and equipment | (115,548 | ) | - | (115,548 | ) | - | ||||||||||||||||||||||||||
Gain on sale of long-term assets | - | - | 125 | - | - | - | - | 125 | ||||||||||||||||||||||||
Total other expense, net | (767 | ) | (168 | ) | (648 | ) | (269 | ) | (115,553 | ) | (767 | ) | (117,060 | ) | (648 | ) | ||||||||||||||||
Loss before income taxes | (4,044,293 | ) | (2,041,096 | ) | (5,720,651 | ) | (3,211,700 | ) | ||||||||||||||||||||||||
Income tax net expense | (3,243 | ) | (4,152,987 | ) | (6,336 | ) | (4,045,777 | ) | ||||||||||||||||||||||||
Loss before income taxes from continuing operations | (979,756 | ) | (2,896,942 | ) | (1,725,028 | ) | (3,534,728 | ) | ||||||||||||||||||||||||
Income tax net expense from continuing operations | (3,500 | ) | (3,243 | ) | (6,743 | ) | (6,336 | ) | ||||||||||||||||||||||||
Net loss from continuing operations | (983,256 | ) | (2,900,185 | ) | (1,731,771 | ) | (3,541,064 | ) | ||||||||||||||||||||||||
Discontinued operations: | ||||||||||||||||||||||||||||||||
Loss from discontinued operations | (4,708 | ) | (1,147,351 | ) | (579,078 | ) | (2,185,923 | ) | ||||||||||||||||||||||||
Gain on sale of assets from discontinued operations | - | - | 15,463 | - | ||||||||||||||||||||||||||||
Net loss from discontinued operations | (4,708 | ) | (1,147,351 | ) | (563,615 | ) | (2,185,923 | ) | ||||||||||||||||||||||||
Net loss | $ | (4,047,536 | ) | $ | (6,194,083 | ) | $ | (5,726,987 | ) | $ | (7,257,477 | ) | $ | (987,964 | ) | $ | (4,047,536 | ) | $ | (2,295,386 | ) | $ | (5,726,987 | ) | ||||||||
Net loss per common share: | ||||||||||||||||||||||||||||||||
Basic | $ | (0.20 | ) | $ | (0.31 | ) | $ | (0.28 | ) | $ | (0.36 | ) | ||||||||||||||||||||
Diluted | $ | (0.20 | ) | $ | (0.31 | ) | $ | (0.28 | ) | $ | (0.36 | ) | ||||||||||||||||||||
Basic – continuing operations | $ | (0.05 | ) | $ | (0.14 | ) | $ | (0.08 | ) | $ | (0.17 | ) | ||||||||||||||||||||
Basic – discontinued operations | (0.00 | ) | (0.06 | ) | (0.03 | ) | (0.11 | ) | ||||||||||||||||||||||||
Basic – total | $ | (0.05 | ) | $ | (0.20 | ) | $ | (0.11 | ) | $ | (0.28 | ) | ||||||||||||||||||||
Diluted – continuing operations | $ | (0.05 | ) | $ | (0.14 | ) | $ | (0.08 | ) | $ | (0.17 | ) | ||||||||||||||||||||
Diluted – discontinued operations | (0.00 | ) | (0.06 | ) | (0.03 | ) | (0.11 | ) | ||||||||||||||||||||||||
Diluted – total | $ | (0.05 | ) | $ | (0.20 | ) | $ | (0.11 | ) | $ | (0.28 | ) | ||||||||||||||||||||
Weighted average number of shares used in computing net loss per common share: | ||||||||||||||||||||||||||||||||
Basic | 20,326,577 | 20,262,299 | 20,217,646 | 20,229,979 | 20,966,256 | 20,326,577 | 20,848,337 | 20,217,646 | ||||||||||||||||||||||||
Diluted | 20,326,577 | 20,262,299 | 20,217,646 | 20,229,979 | 20,966,256 | 20,326,577 | 20,848,337 | 20,217,646 |
Six Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
2015 | 2014 | 2016 | 2015 | |||||||||||||
CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||||||||||
Net loss | $ | (5,726,987 | ) | $ | (7,257,477 | ) | $ | (1,731,771 | ) | $ | (3,541,064 | ) | ||||
Adjustments to reconcile net loss to net cash provided by operating activities: | ||||||||||||||||
Depreciation and amortization | 440,676 | 588,745 | 330,147 | 387,543 | ||||||||||||
Stock-based compensation | 773,342 | 810,490 | 594,728 | 676,664 | ||||||||||||
Provision for uncollectible accounts | 19,000 | 682,725 | (59,558 | ) | 19,000 | |||||||||||
Provision for sales returns | (581,000 | ) | (845,000 | ) | (295,000 | ) | (581,000 | ) | ||||||||
Provision for inventory reserves | 615,000 | 69,000 | 55,000 | 615,000 | ||||||||||||
Provision for deferred income taxes | - | 4,039,723 | ||||||||||||||
Loss on abandonment of assets | - | 2,201 | ||||||||||||||
Loss on abandonment of property and equipment | 115,548 | - | ||||||||||||||
Gain on sale of long-term assets | (125 | ) | - | - | (125 | ) | ||||||||||
Changes in assets and liabilities: | ||||||||||||||||
Changes in operating assets and liabilities: | ||||||||||||||||
Accounts receivable | 1,609,967 | 2,590,297 | 1,978,664 | 1,609,967 | ||||||||||||
Inventory | 3,794,495 | 868,994 | 6,190,637 | 3,794,495 | ||||||||||||
Prepaid expenses and other assets, net | (264,239 | ) | (394,745 | ) | (171,358 | ) | (266,933 | ) | ||||||||
Accounts payable | 28,047 | (10,651 | ) | (260,448 | ) | (77,039 | ) | |||||||||
Accrued cooperative advertising | (184,000 | ) | 8,000 | (58,000 | ) | (184,000 | ) | |||||||||
Accrued income taxes | 6,336 | 6,054 | 6,743 | 6,336 | ||||||||||||
Other accrued liabilities | 744,375 | 647,581 | (175,285 | ) | 713,860 | |||||||||||
Net cash provided by operating activities of continuing operations | 6,520,047 | 3,172,704 | ||||||||||||||
Net cash used in operating activities of discontinued operations | (935,326 | ) | (1,897,817 | ) | ||||||||||||
Net cash provided by operating activities | 1,274,887 | 1,805,937 | 5,584,721 | 1,274,887 | ||||||||||||
CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||||||||||
Purchases of property and equipment | (155,185 | ) | (956,666 | ) | (118,433 | ) | (145,733 | ) | ||||||||
Patent, license rights, and trademark costs | (45,742 | ) | (59,863 | ) | (255 | ) | (45,742 | ) | ||||||||
Proceeds from sale of assets | 175 | - | ||||||||||||||
Net cash used in investing activities | (200,752 | ) | (1,016,529 | ) | ||||||||||||
Proceeds from sale of long-term assets | - | 175 | ||||||||||||||
Net cash used in investing activities of continuing operations | (118,688 | ) | (191,300 | ) | ||||||||||||
Net cash provided by (used in) investing activities of discontinued operations | 368,671 | (9,452 | ) | |||||||||||||
Net cash provided by (used in) investing activities | 249,983 | (200,752 | ) | |||||||||||||
CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||||||||||
Stock option exercises | 172,766 | - | 2,300 | 172,766 | ||||||||||||
Net cash provided by financing activities | 172,766 | - | ||||||||||||||
Net cash provided by financing activities of continuing operations | 2,300 | 172,766 | ||||||||||||||
NET INCREASE IN CASH AND CASH EQUIVALENTS | 1,246,901 | 789,408 | 5,837,004 | 1,246,901 | ||||||||||||
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD | 4,007,341 | 2,573,405 | 5,274,305 | 4,007,341 | ||||||||||||
CASH AND CASH EQUIVALENTS, END OF PERIOD | $ | 5,254,242 | $ | 3,362,813 | $ | 11,111,309 | $ | 5,254,242 | ||||||||
Supplemental disclosure of cash flow information: | ||||||||||||||||
Cash paid during the period for interest | $ | 784 | $ | 318 | $ | 1,512 | $ | 784 | ||||||||
Cash paid during the period for income taxes | $ | - | $ | - | $ | - | $ | - |
1. | DESCRIPTION OF BUSINESS |
2. | BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES |
3. | SEGMENT INFORMATION AND GEOGRAPHIC DATA |
Three Months Ended June 30, 2015 | Three Months Ended June 30, 2016 | |||||||||||||||||||||||||||
Wholesale | Moissanite.com | Charles & Colvard Direct | Total | Wholesale | Moissanite.com | Total | ||||||||||||||||||||||
Net sales | ||||||||||||||||||||||||||||
Loose jewels | $ | 3,628,160 | $ | 138,148 | $ | - | $ | 3,766,308 | $ | 4,826,839 | $ | 129,986 | $ | 4,956,825 | ||||||||||||||
Finished jewelry | 1,294,494 | 1,122,732 | 1,293,338 | 3,710,564 | 544,816 | 1,025,363 | 1,570,179 | |||||||||||||||||||||
Total | $ | 4,922,654 | $ | 1,260,880 | $ | 1,293,338 | $ | 7,476,872 | $ | 5,371,655 | $ | 1,155,349 | $ | 6,527,004 | ||||||||||||||
Product line cost of goods sold | ||||||||||||||||||||||||||||
Loose jewels | $ | 3,040,470 | $ | 21,748 | $ | 65 | $ | 3,062,283 | $ | 2,351,579 | $ | 18,244 | $ | 2,369,823 | ||||||||||||||
Finished jewelry | 1,204,174 | 533,659 | 259,089 | 1,996,922 | 775,670 | 420,004 | 1,195,674 | |||||||||||||||||||||
Total | $ | 4,244,644 | $ | 555,407 | $ | 259,154 | $ | 5,059,205 | $ | 3,127,249 | $ | 438,248 | $ | 3,565,497 | ||||||||||||||
Product line gross profit | ||||||||||||||||||||||||||||
Loose jewels | $ | 587,690 | $ | 116,400 | $ | (65 | ) | $ | 704,025 | $ | 2,475,260 | $ | 111,742 | $ | 2,587,002 | |||||||||||||
Finished jewelry | 90,320 | 589,073 | 1,034,249 | 1,713,642 | (230,854 | ) | 605,359 | 374,505 | ||||||||||||||||||||
Total | $ | 678,010 | $ | 705,473 | $ | 1,034,184 | $ | 2,417,667 | $ | 2,244,406 | $ | 717,101 | $ | 2,961,507 | ||||||||||||||
Operating loss | $ | (2,617,570 | ) | $ | (278,605 | ) | $ | (1,147,351 | ) | $ | (4,043,526 | ) | $ | (268,076 | ) | $ | (596,127 | ) | $ | (864,203 | ) | |||||||
Depreciation and amortization | $ | 163,209 | $ | 31,987 | $ | 26,752 | $ | 221,948 | $ | 167,553 | $ | 16,103 | $ | 183,656 | ||||||||||||||
Capital expenditures | $ | 35,636 | $ | - | $ | 2,445 | $ | 38,081 | $ | 51,648 | $ | 28,280 | $ | 79,928 |
Three Months Ended June 30, 2014 | Three Months Ended June 30, 2015 | |||||||||||||||||||||||||||
Wholesale | Moissanite.com | Charles & Colvard Direct | Total | Wholesale | Moissanite.com | Total | ||||||||||||||||||||||
Net sales | ||||||||||||||||||||||||||||
Loose jewels | $ | 3,837,012 | $ | 171,819 | $ | 1,508 | $ | 4,010,339 | $ | 3,628,161 | $ | 138,148 | $ | 3,766,309 | ||||||||||||||
Finished jewelry | 3,012,372 | 536,201 | 282,735 | 3,831,308 | 1,294,494 | 1,122,732 | 2,417,226 | |||||||||||||||||||||
Total | $ | 6,849,384 | $ | 708,020 | $ | 284,243 | $ | 7,841,647 | $ | 4,922,655 | $ | 1,260,880 | $ | 6,183,535 | ||||||||||||||
Product line cost of goods sold | ||||||||||||||||||||||||||||
Loose jewels | $ | 2,040,944 | $ | 24,902 | $ | 444 | $ | 2,066,290 | $ | 3,040,470 | $ | 21,748 | $ | 3,062,218 | ||||||||||||||
Finished jewelry | 2,377,715 | 287,023 | 82,626 | 2,747,364 | 1,204,174 | 533,659 | 1,737,833 | |||||||||||||||||||||
Total | $ | 4,418,659 | $ | 311,925 | $ | 83,070 | $ | 4,813,654 | $ | 4,244,644 | $ | 555,407 | $ | 4,800,051 | ||||||||||||||
Product line gross profit | ||||||||||||||||||||||||||||
Loose jewels | $ | 1,796,068 | $ | 146,917 | $ | 1,064 | $ | 1,944,049 | $ | 587,691 | $ | 116,400 | $ | 704,091 | ||||||||||||||
Finished jewelry | 634,657 | 249,178 | 200,109 | 1,083,944 | 90,320 | 589,073 | 679,393 | |||||||||||||||||||||
Total | $ | 2,430,725 | $ | 396,095 | $ | 201,173 | $ | 3,027,993 | $ | 678,011 | $ | 705,473 | $ | 1,383,484 | ||||||||||||||
Operating loss | $ | (1,008,146 | ) | $ | (331,243 | ) | $ | (701,539 | ) | $ | (2,040,928 | ) | $ | (2,617,570 | ) | $ | (278,605 | ) | $ | (2,896,175 | ) | |||||||
Depreciation and amortization | $ | 214,021 | $ | 71,093 | $ | 25,833 | $ | 310,947 | $ | 163,209 | $ | 31,987 | $ | 195,196 | ||||||||||||||
Capital expenditures | $ | 928,341 | $ | - | $ | - | $ | 928,341 | $ | 35,636 | $ | - | $ | 35,636 |
Six Months Ended June 30, 2015 | Six Months Ended June 30, 2016 | |||||||||||||||||||||||||||
Wholesale | Moissanite.com | Charles & Colvard Direct | Total | Wholesale | Moissanite.com | Total | ||||||||||||||||||||||
Net sales | ||||||||||||||||||||||||||||
Loose jewels | $ | 7,316,034 | $ | 271,404 | $ | - | $ | 7,587,438 | $ | 14,351,193 | $ | 246,449 | $ | 14,597,642 | ||||||||||||||
Finished jewelry | 3,518,781 | 2,093,402 | 2,654,315 | 8,266,498 | 1,081,286 | 2,241,347 | 3,322,633 | |||||||||||||||||||||
Total | $ | 10,834,815 | $ | 2,364,806 | $ | 2,654,315 | $ | 15,853,936 | $ | 15,432,479 | $ | 2,487,796 | $ | 17,920,275 | ||||||||||||||
Product line cost of goods sold | ||||||||||||||||||||||||||||
Loose jewels | $ | 5,242,573 | $ | 40,819 | $ | 65 | $ | 5,283,457 | $ | 10,158,834 | $ | 25,049 | $ | 10,183,883 | ||||||||||||||
Finished jewelry | 2,431,984 | 1,014,019 | 578,864 | 4,024,867 | 1,019,882 | 940,899 | 1,960,781 | |||||||||||||||||||||
Total | $ | 7,674,557 | $ | 1,054,838 | $ | 578,929 | $ | 9,308,324 | $ | 11,178,716 | $ | 965,948 | $ | 12,144,664 | ||||||||||||||
Product line gross profit | ||||||||||||||||||||||||||||
Loose jewels | $ | 2,073,461 | $ | 230,585 | $ | (65 | ) | $ | 2,303,981 | $ | 4,192,359 | $ | 221,400 | $ | 4,413,759 | |||||||||||||
Finished jewelry | 1,086,797 | 1,079,383 | 2,075,451 | 4,241,631 | 61,404 | 1,300,448 | 1,361,852 | |||||||||||||||||||||
Total | $ | 3,160,258 | $ | 1,309,968 | $ | 2,075,386 | $ | 6,545,612 | $ | 4,253,763 | $ | 1,521,848 | $ | 5,775,611 | ||||||||||||||
Operating loss | $ | (2,851,346 | ) | $ | (682,734 | ) | $ | (2,185,923 | ) | $ | (5,720,003 | ) | $ | (797,562 | ) | $ | (810,406 | ) | $ | (1,607,968 | ) | |||||||
Depreciation and amortization | $ | 323,849 | $ | 63,694 | $ | 53,133 | $ | 440,676 | $ | 299,601 | $ | 30,546 | $ | 330,147 | ||||||||||||||
Capital expenditures | $ | 145,200 | $ | 533 | $ | 9,452 | $ | 155,185 | $ | 88,551 | $ | 29,882 | $ | 118,433 |
Six Months Ended June 30, 2014 | Six Months Ended June 30, 2015 | |||||||||||||||||||||||||||
Wholesale | Moissanite.com | Charles & Colvard Direct | Total | Wholesale | Moissanite.com | Total | ||||||||||||||||||||||
Net sales | ||||||||||||||||||||||||||||
Loose jewels | $ | 7,370,756 | $ | 318,761 | $ | 1,508 | $ | 7,691,025 | $ | 7,316,034 | $ | 271,404 | $ | 7,587,438 | ||||||||||||||
Finished jewelry | 4,632,243 | 1,097,467 | 488,465 | 6,218,175 | 3,518,781 | 2,093,402 | 5,612,183 | |||||||||||||||||||||
Total | $ | 12,002,999 | $ | 1,416,228 | $ | 489,973 | $ | 13,909,200 | $ | 10,834,815 | $ | 2,364,806 | $ | 13,199,621 | ||||||||||||||
Product line cost of goods sold | ||||||||||||||||||||||||||||
Loose jewels | $ | 3,816,079 | $ | 47,175 | $ | 444 | $ | 3,863,698 | $ | 5,242,573 | $ | 40,819 | $ | 5,283,392 | ||||||||||||||
Finished jewelry | 3,657,816 | 581,908 | 145,888 | 4,385,612 | 2,431,984 | 1,014,019 | 3,446,003 | |||||||||||||||||||||
Total | $ | 7,473,895 | $ | 629,083 | $ | 146,332 | $ | 8,249,310 | $ | 7,674,557 | $ | 1,054,838 | $ | 8,729,395 | ||||||||||||||
Product line gross profit | ||||||||||||||||||||||||||||
Loose jewels | $ | 3,554,677 | $ | 271,586 | $ | 1,064 | $ | 3,827,327 | $ | 2,073,461 | $ | 230,585 | $ | 2,304,046 | ||||||||||||||
Finished jewelry | 974,427 | 515,559 | 342,577 | 1,832,563 | 1,086,797 | 1,079,383 | 2,166,180 | |||||||||||||||||||||
Total | $ | 4,529,104 | $ | 787,145 | $ | 343,641 | $ | 5,659,890 | $ | 3,160,258 | $ | 1,309,968 | $ | 4,470,226 | ||||||||||||||
Operating loss | $ | (1,133,003 | ) | $ | (736,014 | ) | $ | (1,342,414 | ) | $ | (3,211,431 | ) | $ | (2,851,346 | ) | $ | (682,734 | ) | $ | (3,534,080 | ) | |||||||
Depreciation and amortization | $ | 393,693 | $ | 144,252 | $ | 50,800 | $ | 588,745 | $ | 323,849 | $ | 63,694 | $ | 387,543 | ||||||||||||||
Capital expenditures | $ | 956,666 | $ | - | $ | - | $ | 956,666 | $ | 145,200 | $ | 533 | $ | 145,733 |
June 30, 2015 | ||||||||||||||||
Wholesale | Moissanite.com | Charles & Colvard Direct | Total | |||||||||||||
Total assets | $ | 47,064,928 | $ | 87,091 | $ | 88,257 | $ | 47,240,276 |
June 30, 2016 | ||||||||||||
Wholesale | Moissanite.com | Total | ||||||||||
Total assets | $ | 41,674,640 | $ | 158,271 | $ | 41,832,911 |
December 31, 2014 | ||||||||||||||||
Wholesale | Moissanite.com | Charles & Colvard Direct | Total | |||||||||||||
Total assets | $ | 51,183,888 | $ | 128,049 | $ | 114,460 | $ | 51,426,397 |
December 31, 2015 | ||||||||||||
Wholesale | Moissanite.com | Total | ||||||||||
Total assets | $ | 43,882,939 | $ | 174,899 | $ | 44,057,838 |
Three Months Ended June 30, | Six Months Ended June 30, | Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||||||||||||||||
2015 | 2014 | 2015 | 2014 | 2016 | 2015 | 2016 | 2015 | |||||||||||||||||||||||||
Product line cost of goods sold | $ | 5,059,205 | $ | 4,813,654 | $ | 9,308,324 | $ | 8,249,310 | $ | 3,565,497 | $ | 4,800,051 | $ | 12,144,664 | $ | 8,729,395 | ||||||||||||||||
Non-capitalized manufacturing and production control expenses | 500,460 | 256,144 | 647,572 | 411,167 | 331,533 | 500,460 | 742,299 | 647,572 | ||||||||||||||||||||||||
Freight out | 111,256 | 76,077 | 201,990 | 135,976 | 91,031 | 79,534 | 163,089 | 147,998 | ||||||||||||||||||||||||
Inventory valuation allowances | 411,000 | 45,000 | 615,000 | 69,000 | - | 411,000 | 55,000 | 615,000 | ||||||||||||||||||||||||
Other inventory adjustments | 379,616 | 134,106 | 532,554 | 122,570 | (93,967 | ) | 301,813 | (47,040 | ) | 381,516 | ||||||||||||||||||||||
Cost of goods sold | $ | 6,461,537 | $ | 5,324,981 | $ | 11,305,440 | $ | 8,988,023 | $ | 3,894,094 | $ | 6,092,858 | $ | 13,057,982 | $ | 10,521,481 |
June 30, 2015 | December 31, 2014 | June 30, 2016 | December 31, 2015 | |||||||||||||
Loose jewels | ||||||||||||||||
Raw materials | $ | 6,103,326 | $ | 4,658,692 | $ | 4,550,319 | $ | 6,741,712 | ||||||||
Work-in-process | 5,277,481 | 5,752,103 | 8,014,873 | 5,516,799 | ||||||||||||
Finished goods | 17,769,727 | 21,495,873 | 9,438,017 | 15,877,436 | ||||||||||||
Finished goods on consignment | 75,375 | 46,284 | 44,861 | 55,388 | ||||||||||||
Total | $ | 29,225,909 | $ | 31,952,952 | $ | 22,048,070 | $ | 28,191,335 | ||||||||
Finished jewelry | ||||||||||||||||
Raw materials | $ | 164,193 | $ | 258,707 | $ | 308,415 | $ | 190,427 | ||||||||
Work-in-process | 507,480 | 540,576 | 473,846 | 514,946 | ||||||||||||
Finished goods | 4,481,665 | 5,557,417 | 3,050,221 | 3,193,569 | ||||||||||||
Finished goods on consignment | 109,904 | 578,200 | 162,555 | 200,613 | ||||||||||||
Total | $ | 5,263,242 | $ | 6,934,900 | $ | 3,995,037 | $ | 4,099,555 |
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
2016 | 2015 | 2016 | 2015 | |||||||||||||
Net sales | ||||||||||||||||
United States | $ | 5,450,060 | $ | 5,662,932 | $ | 16,092,042 | $ | 12,064,300 | ||||||||
International | 1,076,944 | 520,603 | 1,828,233 | 1,135,321 | ||||||||||||
Total | $ | 6,527,004 | $ | 6,183,535 | $ | 17,920,275 | $ | 13,199,621 |
Three Months Ended June 30, | Six Months Ended June 30, | June 30, 2016 | December 31, 2015 | |||||||||||||||||||||
2015 | 2014 | 2015 | 2014 | |||||||||||||||||||||
Net sales | ||||||||||||||||||||||||
Property and equipment, net | ||||||||||||||||||||||||
United States | $ | 6,956,269 | $ | 7,267,441 | $ | 14,718,615 | $ | 12,976,474 | $ | 1,317,659 | $ | 1,615,683 | ||||||||||||
International | 520,603 | 574,206 | 1,135,321 | 932,726 | - | - | ||||||||||||||||||
Total | $ | 7,476,872 | $ | 7,841,647 | $ | 15,853,936 | $ | 13,909,200 | $ | 1,317,659 | $ | 1,615,683 |
June 30, 2015 | December 31, 2014 | |||||||
Property and equipment, net | ||||||||
United States | $ | 1,663,608 | $ | 1,859,355 | ||||
International | - | - | ||||||
Total | $ | 1,663,608 | $ | 1,859,355 |
June 30, 2015 | December 31, 2014 | June 30, 2016 | December 31, 2015 | |||||||||||||
Intangible assets, net | ||||||||||||||||
United States | $ | 26,978 | $ | 39,050 | $ | 5,564 | $ | 15,362 | ||||||||
International | 145,917 | 177,897 | - | 55,724 | ||||||||||||
Total | $ | 172,895 | $ | 216,947 | $ | 5,564 | $ | 71,086 |
4. | FAIR VALUE MEASUREMENTS |
· | Level 1 - quoted prices in active markets for identical assets and liabilities |
· | Level 2 - inputs other than Level 1 quoted prices that are directly or indirectly observable |
· | Level 3 - unobservable inputs that are not corroborated by market data |
5. | INVENTORIES |
June 30, 2015 | December 31, 2014 | June 30, 2016 | December 31, 2015 | |||||||||||||
Raw materials | $ | 6,267,519 | $ | 4,917,399 | $ | 4,858,734 | $ | 6,932,139 | ||||||||
Work-in-process | 5,784,961 | 6,292,679 | 8,488,719 | 6,031,745 | ||||||||||||
Finished goods | 23,795,375 | 27,985,067 | 13,909,914 | 20,441,535 | ||||||||||||
Finished goods on consignment | 210,279 | 677,484 | 247,416 | 293,001 | ||||||||||||
Less inventory reserves | (1,529,000 | ) | (934,000 | ) | (1,422,000 | ) | (1,370,000 | ) | ||||||||
Total | $ | 34,529,134 | $ | 38,938,629 | $ | 26,082,783 | $ | 32,328,420 | ||||||||
Current portion | $ | 13,404,996 | $ | 13,320,639 | $ | 10,121,500 | $ | 10,739,798 | ||||||||
Long-term portion | 21,124,138 | 25,617,990 | 15,961,283 | 21,588,622 | ||||||||||||
Total | $ | 34,529,134 | $ | 38,938,629 | $ | 26,082,783 | $ | 32,328,420 |
6. | INCOME TAXES |
7. | COMMITMENTS AND CONTINGENCIES |
2015 | $ | 280,076 | ||||||
2016 | 569,138 | $ | 287,778 | |||||
2017 | 584,789 | 584,789 | ||||||
2018 | 600,871 | 600,871 | ||||||
2019 | 617,395 | 617,395 | ||||||
2020 | 634,373 | |||||||
Thereafter | 1,176,330 | 541,957 | ||||||
Total | $ | 3,828,599 | $ | 3,267,163 |
8. | LINE OF CREDIT |
9. | STOCK-BASED COMPENSATION |
Three Months Ended June 30, | Six Months Ended June 30, | Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||||||||||||||||
2015 | 2014 | 2015 | 2014 | 2016 | 2015 | 2016 | 2015 | |||||||||||||||||||||||||
Employee stock options | $ | 119,990 | $ | 209,698 | $ | 306,461 | $ | 392,422 | $ | 105,543 | $ | 119,990 | $ | 244,726 | $ | 306,461 | ||||||||||||||||
Consultant stock options | 25,203 | - | 41,448 | - | 46,862 | 25,203 | 97,110 | 41,448 | ||||||||||||||||||||||||
Restricted stock awards | 248,910 | 224,281 | 425,433 | 418,068 | 152,472 | 248,910 | 297,063 | 425,433 | ||||||||||||||||||||||||
Income tax benefit | - | (78,349 | ) | - | (146,046 | ) | ||||||||||||||||||||||||||
Totals | $ | 394,103 | $ | 355,630 | $ | 773,342 | $ | 664,444 | $ | 304,877 | $ | 394,103 | $ | 638,899 | $ | 773,342 |
Shares | Weighted Average Exercise Price | Shares | Weighted Average Exercise Price | |||||||||||||
Outstanding, December 31, 2014 | 1,665,946 | $ | 2.93 | |||||||||||||
Outstanding, December 31, 2015 | 2,441,077 | $ | 2.11 | |||||||||||||
Granted | 526,133 | $ | 1.39 | 441,005 | $ | 1.11 | ||||||||||
Exercised | (241,752 | ) | $ | 0.71 | (2,500 | ) | $ | 0.92 | ||||||||
Forfeited | (90,856 | ) | $ | 3.55 | (298,747 | ) | $ | 1.40 | ||||||||
Expired | (300,892 | ) | $ | 2.96 | (261,229 | ) | $ | 1.80 | ||||||||
Outstanding, June 30, 2015 | 1,558,579 | $ | 2.71 | |||||||||||||
Outstanding, June 30, 2016 | 2,319,606 | $ | 2.05 |
Dividend yield | 0.0 | % | ||
Expected volatility | % | |||
Risk-free interest rate | % | |||
Expected lives (years) |
Options Outstanding | Options Exercisable | Options Vested or Expected to Vest | ||||||||||||||||||||||||||||||
Balance as of 6/30/2015 | Weighted Average Remaining Contractual Life (Years) | Weighted Average Exercise Price | Balance as of 6/30/2015 | Weighted Average Remaining Contractual Life (Years) | Weighted Average Exercise Price | Balance as of 6/30/2015 | Weighted Average Remaining Contractual Life (Years) | Weighted Average Exercise Price | ||||||||||||||||||||||||
1,558,579 | 7.84 | $ | 2.71 | 736,338 | 6.23 | $ | 3.26 | 1,486,036 | 7.77 | $ | 2.74 |
Options Outstanding | Options Exercisable | Options Vested or Expected to Vest | ||||||||||||||||||||||||||||||||
Balance as of 6/30/2016 | Weighted Average Remaining Contractual Life (Years) | Weighted Average Exercise Price | Balance as of 6/30/2016 | Weighted Average Remaining Contractual Life (Years) | Weighted Average Exercise Price | Balance as of 6/30/2016 | Weighted Average Remaining Contractual Life (Years) | Weighted Average Exercise Price | ||||||||||||||||||||||||||
2,319,606 | 7.40 | $ | 2.05 | 1,389,202 | 6.16 | $ | 2.42 | 2,257,735 | 7.35 | $ | 2.06 |
Shares | Weighted Average Grant Date Fair Value | Shares | Weighted Average Grant Date Fair Value | |||||||||||||
Unvested, December 31, 2014 | 287,006 | $ | 3.29 | |||||||||||||
Unvested, December 31, 2015 | 425,000 | $ | 1.87 | |||||||||||||
Granted | 487,500 | $ | 1.38 | 509,250 | $ | 0.93 | ||||||||||
Vested | (220,752 | ) | $ | 2.58 | (295,146 | ) | $ | 1.74 | ||||||||
Canceled | - | $ | - | (116,100 | ) | $ | 1.42 | |||||||||
Unvested, June 30, 2015 | 553,754 | $ | 1.89 | |||||||||||||
Unvested, June 30, 2016 | 523,004 | $ | 1.13 |
10. | NET LOSS PER COMMON SHARE |
Three Months Ended June 30, | Six Months Ended June 30, | Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||||||||||||||||
2015 | 2014 | 2015 | 2014 | 2016 | 2015 | 2016 | 2015 | |||||||||||||||||||||||||
Numerator: | ||||||||||||||||||||||||||||||||
Net loss from continuing operations | $ | (983,256 | ) | $ | (2,900,185 | ) | $ | (1,731,771 | ) | $ | (3,541,064 | ) | ||||||||||||||||||||
Net loss from discontinued operations | (4,708 | ) | (1,147,351 | ) | (563,615 | ) | (2,185,923 | ) | ||||||||||||||||||||||||
Net loss | $ | (4,047,536 | ) | $ | (6,194,083 | ) | $ | (5,726,987 | ) | $ | (7,257,477 | ) | $ | (987,964 | ) | $ | (4,047,536 | ) | $ | (2,295,386 | ) | $ | (5,726,987 | ) | ||||||||
Denominator: | ||||||||||||||||||||||||||||||||
Weighted average common shares outstanding: | ||||||||||||||||||||||||||||||||
Basic | 20,326,577 | 20,262,299 | 20,217,646 | 20,229,979 | 20,966,256 | 20,326,577 | 20,848,337 | 20,217,646 | ||||||||||||||||||||||||
Stock options | - | - | - | - | ||||||||||||||||||||||||||||
Fully diluted | 20,326,577 | 20,262,299 | 20,217,646 | 20,229,979 | ||||||||||||||||||||||||||||
Stock options and restricted stock | - | - | - | - | ||||||||||||||||||||||||||||
Diluted | 20,966,256 | 20,326,577 | 20,848,337 | 20,217,646 | ||||||||||||||||||||||||||||
Net loss per common share: | ||||||||||||||||||||||||||||||||
Basic | $ | (0.20 | ) | $ | (0.31 | ) | $ | (0.28 | ) | $ | (0.36 | ) | ||||||||||||||||||||
Diluted | $ | (0.20 | ) | $ | (0.31 | ) | $ | (0.28 | ) | $ | (0.36 | ) | ||||||||||||||||||||
Basic – continuing operations | $ | (0.05 | ) | $ | (0.14 | ) | $ | (0.08 | ) | $ | (0.17 | ) | ||||||||||||||||||||
Basic – discontinued operations | (0.00 | ) | (0.06 | ) | (0.03 | ) | (0.11 | ) | ||||||||||||||||||||||||
Basic – total | $ | (0.05 | ) | $ | (0.20 | ) | $ | (0.11 | ) | $ | (0.28 | ) | ||||||||||||||||||||
Diluted – continuing operations | $ | (0.05 | ) | $ | (0.14 | ) | $ | (0.08 | ) | $ | (0.17 | ) | ||||||||||||||||||||
Diluted – discontinued operations | (0.00 | ) | (0.06 | ) | (0.03 | ) | (0.11 | ) | ||||||||||||||||||||||||
Diluted – total | $ | (0.05 | ) | $ | (0.20 | ) | $ | (0.11 | ) | $ | (0.28 | ) |
11. | MAJOR CUSTOMERS AND CONCENTRATION OF CREDIT RISK |
June 30, 2015 | December 31, 2014 | June 30, 2016 | December 31, 2015 | |||||||||||||
Customer A | 59 | % | 28 | % | 22 | % | 14 | % | ||||||||
Customer B | 14 | % | 11 | % | 16 | % | **% | |||||||||
Customer C | 10 | % | **% | |||||||||||||
Customer D | * | % | 17 | % | ||||||||||||
Customer E | * | % | 11 | % | ||||||||||||
Customer F | * | % | 10 | % |
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
2015 | 2014 | 2015 | 2014 | |||||||||||||
Customer A | 43 | % | 36 | % | 33 | % | 30 | % | ||||||||
Customer B | 1 | % | 4 | % | 9 | % | 13 | % | ||||||||
Customer C | 0 | % | 15 | % | -2 | % | 17 | % |
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
2016 | 2015 | 2016 | 2015 | |||||||||||||
Customer B | 27 | % | 1 | % | 14 | % | 11 | % | ||||||||
Customer D | * | % | 52 | % | 38 | % | 40 | % |
12. | DISCONTINUED OPERATIONS |
June 30, 2016 | December 31, 2015 | |||||||
Prepaid expenses and other assets | $ | 750 | $ | 83,000 | ||||
Total assets | $ | 750 | $ | 83,000 | ||||
Accounts payable | $ | 35,000 | $ | 140,000 | ||||
Accrued expenses and other liabilities | 148,000 | 209,000 | ||||||
Total liabilities | $ | 183,000 | $ | 349,000 |
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
2016 | 2015 | 2016 | 2015 | |||||||||||||
Net sales | $ | 53,698 | $ | 1,293,337 | $ | 770,771 | $ | 2,654,315 | ||||||||
Costs and expenses: | ||||||||||||||||
Cost of goods sold | 9,501 | 368,679 | 268,590 | 783,959 | ||||||||||||
Sales and marketing | 44,389 | 1,729,940 | 908,197 | 3,345,360 | ||||||||||||
General and administrative | 4,516 | 342,069 | 173,051 | 710,919 | ||||||||||||
Interest expense | - | - | 11 | - | ||||||||||||
Total costs and expenses | 58,406 | 2,440,688 | 1,349,849 | 4,840,238 | ||||||||||||
Loss from discontinued operations | (4,708 | ) | (1,147,351 | ) | (579,078 | ) | (2,185,923 | ) | ||||||||
Other income (expense): | ||||||||||||||||
Gain on sale of long-term assets | - | - | 15,463 | - | ||||||||||||
Total other income (expense), net | - | - | 15,463 | - | ||||||||||||
Pretax loss from discontinued operations | $ | (4,708 | ) | $ | (1,147,351 | ) | $ | (563,615 | ) | $ | (2,185,923 | ) |
· | Our future financial performance depends upon increased consumer awareness and acceptance, growth of sales of our products, and operational execution of our strategic initiatives. |
· | We are currently substantially dependent on a limited number of distributors, jewelry manufacturers, and retailers for the sale of our products. |
· | The execution of our business plans could significantly impact our liquidity. |
· | Our business and our results of operations could be materially adversely affected as a result of our inability to fulfill orders on a timely basis. |
· | The financial difficulties or insolvency of one or more of our major customers or their lack of willingness and ability to market our products could adversely affect results. |
· | We expect to remain dependent upon our exclusive supply agreement, or the Supply Agreement with Cree, Inc., or Cree, which we entered into on December 12, 2014, for the sole supply of our silicon carbide, or SiC, crystals for the foreseeable future. |
· | We face intense competition in the worldwide jewelry industry. |
· | Our |
· | Our current wholesale customers may potentially perceive us as a competitor in the finished jewelry business. |
· | We |
· | Our business and our results of operations could be materially adversely affected as a result of general economic and market |
· | We are subject to certain risks due to our international distribution channels and vendors. |
· | Our operations could be disrupted by natural disasters. |
· | Sales of moissanite jewelry could be dependent upon the pricing of precious metals, which is beyond our control. |
· | Seasonality of our business may adversely affect our net sales and operating income. |
· | We may not be able to adequately protect our intellectual property, which could harm the value of our products and brands and adversely affect our business. |
· | A failure of our information technology infrastructure or a failure to protect confidential information of our customers and our network against security breaches could adversely impact our business and operations. |
· | If the e-commerce opportunity changes dramatically or if e-commerce technology or providers change their models, our results of operations may be adversely affected. |
· | If we fail to evaluate, implement, and integrate strategic acquisition or disposition opportunities successfully, our business may suffer. |
· | Governmental regulation and oversight might adversely impact our operations. |
· | Some anti-takeover provisions of our charter documents |
· |
· | A move up-market. Over the years our core product supplier, Cree, has improved its proprietary processes for SiC production. It is this over 20-year evolution that has enabled the launch of our colorless jewel, Forever OneTM. With this improvement in core product comes the opportunity for us to move up-market – competing directly with diamond for share of wallet. We believe that this higher quality product line positions us for a move up-market to higher end retail opportunities. We do anticipate new providers of moissanite to enter the market, as our U.S. exclusive patent expired in 2015, and international patents will be expiring in the third quarter of this year. We know how challenging it is to create high-quality moissanite and anticipate it will take emerging providers significant time and investment to bring meaningful and competitive products to market. As we experienced ourselves, we anticipate these new providers evolving from low-end moissanite quality, and do not anticipate competition in the near-colorless (Forever Brilliant®) or colorless (Forever OneTM) range for some time to come. To differentiate ourselves from emerging competition and to ensure our customers they are receiving a reputable and high-quality jewel, each Charles & Colvard Created Moissanite® jewel is backed by a Limited Lifetime Warranty and Certificate of Authenticity – our commitment to our customers that their purchase is guaranteed to retain its fire and brilliance forever. |
· | Expansion of our jewelry line. We intend to expand our jewelry product line in 2016 to include increased focus on the bridal category. We plan to curate a blend of our own finished jewelry featuring moissanite with products from select artisan jewelers. This broadened collection will be available to our retail and wholesale partners as well as promoted on our e-commerce site and third-party transactional websites. We plan to expand our resources and realign our sales and marketing team in the third quarter of the 2016 to implement this initiative. |
· | Growth within our traditional channels. We have enjoyed over 20 years of partnership with industry leaders in the wholesale and retail spaces. We believe these traditional channels represent fertile ground for our move up-market, and we are already working with several existing partners to expand their product lines to include Forever OneTM. With this new, extraordinary, upscale product we believe we have an opportunity to both expand our relationship with existing partners and onboard new partners. A continued presence for Charles & Colvard Created Moissanite® in traditional retail channels remains an important way for us to create touchpoints directly with consumers by providing them an opportunity to see and believe the beauty and brilliance of moissanite. During the first quarter of 2016, we launched moissanite on a TV shopping network with limited hours and continued sessions with limited hours in the second quarter of 2016. During 2015, this TV shopping network only sold our jewelry on their website. This is an example of creating growth within our traditional channels. |
· | Expansion of our direct-to-consumer e-commerce |
· |
· |
· | Develop significant educational content to help the market understand moissanite, the availability of our expanded selection of loose jewels and finished jewelry featuring moissanite, and our commitment to corporate social responsibility in the products we bring to market and the way we operate our business. We also plan to deliver background content relative to the impact of mining on the |
· | Expand our traditional channels. We plan to |
· | Execute an aggressive social media strategy to directly reach consumers. Leveraging our own social media properties and those of third parties, we believe we will create a dialogue that enables a ‘pull’ strategy which draws consumers to us to learn about and acquire our products. |
· | Expand our online presence including an aggressive push of our product to e-commerce marketplaces, comparison shopping engines, affiliate networks, social commerce sites, and more. We intend to couple these postings with a significant digital marketing presence to deliver online advertising and search engine results to the consumer at the time they are searching for related products. |
· | Adopt new and emerging technologies to deliver our message. In order to remain relevant and in front of today’s rapidly-evolving consumer, it |
Three Months Ended June 30, | Six Months Ended June 30, | Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||||||||||||||||
2015 | 2014 | 2015 | 2014 | 2016 | 2015 | 2016 | 2015 | |||||||||||||||||||||||||
Net sales | $ | 7,476,872 | $ | 7,841,647 | $ | 15,853,936 | $ | 13,909,200 | $ | 6,527,004 | $ | 6,183,535 | $ | 17,920,275 | $ | 13,199,621 | ||||||||||||||||
Costs and expenses: | ||||||||||||||||||||||||||||||||
Cost of goods sold | 6,461,537 | 5,324,981 | 11,305,440 | 8,988,023 | 3,894,094 | 6,092,858 | 13,057,982 | 10,521,481 | ||||||||||||||||||||||||
Sales and marketing | 3,517,870 | 2,171,614 | 6,491,234 | 4,366,225 | 1,803,010 | 1,787,930 | 3,331,595 | 3,145,874 | ||||||||||||||||||||||||
General and administrative | 1,533,948 | 2,376,466 | 3,768,161 | 3,752,681 | 1,693,123 | 1,191,879 | 3,135,818 | 3,057,242 | ||||||||||||||||||||||||
Research and development | 7,043 | 9,514 | 9,104 | 11,501 | 980 | 7,043 | 2,848 | 9,104 | ||||||||||||||||||||||||
Loss on abandonment of assets | - | - | - | 2,201 | ||||||||||||||||||||||||||||
Total costs and expenses | 11,520,398 | 9,882,575 | 21,573,939 | 17,120,631 | 7,391,207 | 9,079,710 | 19,528,243 | 16,733,701 | ||||||||||||||||||||||||
Loss from operations | (4,043,526 | ) | (2,040,928 | ) | (5,720,003 | ) | (3,211,431 | ) | (864,203 | ) | (2,896,175 | ) | (1,607,968 | ) | (3,534,080 | ) | ||||||||||||||||
Other income (expense): | ||||||||||||||||||||||||||||||||
Interest income | - | 20 | 11 | 49 | - | - | - | 11 | ||||||||||||||||||||||||
Interest expense | (767 | ) | (188 | ) | (784 | ) | (318 | ) | (5 | ) | (767 | ) | (1,512 | ) | (784 | ) | ||||||||||||||||
Loss on abandonment of property and equipment | (115,548 | ) | - | (115,548 | ) | - | ||||||||||||||||||||||||||
Gain on sale of long-term assets | - | - | 125 | - | - | - | - | 125 | ||||||||||||||||||||||||
Total other expense, net | (767 | ) | (168 | ) | (648 | ) | (269 | ) | (115,553 | ) | (767 | ) | (117,060 | ) | (648 | ) | ||||||||||||||||
Loss before income taxes | (4,044,293 | ) | (2,041,096 | ) | (5,720,651 | ) | (3,211,700 | ) | ||||||||||||||||||||||||
Income tax net expense | (3,243 | ) | (4,152,987 | ) | (6,336 | ) | (4,045,777 | ) | ||||||||||||||||||||||||
Loss before income taxes from continuing operations | (979,756 | ) | (2,896,942 | ) | (1,725,028 | ) | (3,534,728 | ) | ||||||||||||||||||||||||
Income tax net expense from continuing operations | (3,500 | ) | (3,243 | ) | (6,743 | ) | (6,336 | ) | ||||||||||||||||||||||||
Net loss from continuing operations | (983,256 | ) | (2,900,185 | ) | (1,731,771 | ) | (3,541,064 | ) | ||||||||||||||||||||||||
Discontinued operations: | ||||||||||||||||||||||||||||||||
Loss from discontinued operations | (4,708 | ) | (1,147,351 | ) | (579,078 | ) | (2,185,923 | ) | ||||||||||||||||||||||||
Gain on sale of assets from discontinued operations | - | - | 15,463 | - | ||||||||||||||||||||||||||||
Net loss from discontinued operations | (4,708 | ) | (1,147,351 | ) | (563,615 | ) | (2,185,923 | ) | ||||||||||||||||||||||||
Net loss | $ | (4,047,536 | ) | $ | (6,194,083 | ) | $ | (5,726,987 | ) | $ | (7,257,477 | ) | $ | (987,964 | ) | $ | (4,047,536 | ) | $ | (2,295,386 | ) | $ | (5,726,987 | ) |
Three Months Ended June 30, | Change | Six Months Ended June 30, | Change | Three Months Ended June 30, | Change | Six Months Ended June 30, | Change | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2015 | 2014 | Dollars | Percent | 2015 | 2014 | Dollars | Percent | 2016 | 2015 | Dollars | Percent | 2016 | 2015 | Dollars | Percent | |||||||||||||||||||||||||||||||||||||||||||||||||
Loose jewels | $ | 3,766,308 | $ | 4,010,339 | $ | (244,031 | ) | -6 | % | $ | 7,587,438 | $ | 7,691,025 | $ | (103,587 | ) | -1 | % | $ | 4,956,825 | $ | 3,766,309 | $ | 1,190,516 | 32 | % | $ | 14,597,642 | $ | 7,587,438 | $ | 7,010,204 | 92 | % | ||||||||||||||||||||||||||||||
Finished jewelry | 3,710,564 | 3,831,308 | (120,744 | ) | -3 | % | 8,266,498 | 6,218,175 | 2,048,323 | 33 | % | 1,570,179 | 2,417,226 | (847,047 | ) | -35 | % | 3,322,633 | 5,612,183 | (2,289,550 | ) | -41 | % | |||||||||||||||||||||||||||||||||||||||||
Total consolidated net sales | $ | 7,476,872 | $ | 7,841,647 | $ | (364,775 | ) | -5 | % | $ | 15,853,936 | $ | 13,909,200 | $ | 1,944,736 | 14 | % | $ | 6,527,004 | $ | 6,183,535 | $ | 343,469 | 6 | % | $ | 17,920,275 | $ | 13,199,621 | $ | 4,720,654 | 36 | % |
Three Months Ended June 30, | Change | Six Months Ended June 30, | Change | Three Months Ended June 30, | Change | Six Months Ended June 30, | Change | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2015 | 2014 | Dollars | Percent | 2015 | 2014 | Dollars | Percent | 2016 | 2015 | Dollars | Percent | 2016 | 2015 | Dollars | Percent | |||||||||||||||||||||||||||||||||||||||||||||||||
Product line cost of goods sold | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Loose jewels | $ | 3,062,283 | $ | 2,066,290 | $ | 995,993 | 48 | % | $ | 5,283,457 | $ | 3,863,698 | $ | 1,419,759 | 37 | % | $ | 2,369,823 | $ | 3,062,218 | $ | (692,395 | ) | -23 | % | $ | 10,183,883 | $ | 5,283,392 | $ | 4,900,491 | 93 | % | |||||||||||||||||||||||||||||||
Finished jewelry | 1,996,922 | 2,747,364 | (750,442 | ) | -27 | % | 4,024,867 | 4,385,612 | (360,745 | ) | -8 | % | 1,195,674 | 1,737,833 | (542,159 | ) | -31 | % | 1,960,781 | 3,446,003 | (1,485,222 | ) | -43 | % | ||||||||||||||||||||||||||||||||||||||||
Total product line cost of goods sold | 5,059,205 | 4,813,654 | 245,551 | 5 | % | 9,308,324 | 8,249,310 | 1,059,014 | 13 | % | 3,565,497 | 4,800,051 | (1,234,554 | ) | -26 | % | 12,144,664 | 8,729,935 | 3,415,269 | 39 | % | |||||||||||||||||||||||||||||||||||||||||||
Non-product line cost of goods sold | 1,402,332 | 511,327 | 891,005 | 174 | % | 1,997,116 | 738,713 | 1,258,403 | 170 | % | 328,597 | 1,292,807 | (964,210 | ) | -75 | % | 913,318 | 1,792,086 | (878,768 | ) | -49 | % | ||||||||||||||||||||||||||||||||||||||||||
Total cost of goods sold | $ | 6,461,537 | $ | 5,324,981 | $ | 1,136,556 | 21 | % | $ | 11,305,440 | $ | 8,988,023 | $ | 2,317,417 | 26 | % | $ | 3,894,094 | $ | 6,092,858 | $ | (2,198,764 | ) | -36 | % | $ | 13,057,982 | $ | 10,521,481 | $ | 2,536,501 | 24 | % |
Three Months Ended June 30, | Change | Six Months Ended June 30, | Change | |||||||||||||||||||||||||||||
2015 | 2014 | Dollars | Percent | 2015 | 2014 | Dollars | Percent | |||||||||||||||||||||||||
Sales and marketing | $ | 3,517,870 | $ | 2,171,614 | $ | 1,346,256 | 62 | % | $ | 6,491,234 | $ | 4,366,225 | $ | 2,125,009 | 49 | % |
Three Months Ended June 30, | Change | Six Months Ended June 30, | Change | |||||||||||||||||||||||||||||
2016 | 2015 | Dollars | Percent | 2016 | 2015 | Dollars | Percent | |||||||||||||||||||||||||
Sales and marketing | $ | 1,803,010 | $ | 1,787,930 | $ | 15,080 | 1 | % | $ | 3,331,595 | $ | 3,145,874 | $ | 185,721 | 6 | % |
Three Months Ended June 30, | Change | Six Months Ended June 30, | Change | |||||||||||||||||||||||||||||
2015 | 2014 | Dollars | Percent | 2015 | 2014 | Dollars | Percent | |||||||||||||||||||||||||
General and administrative | $ | 1,533,948 | $ | 2,376,466 | $ | (842,518 | ) | -35 | % | $ | 3,768,161 | $ | 3,752,681 | $ | 15,480 | 0 | % |
Three Months Ended June 30, | Change | Six Months Ended June 30, | Change | |||||||||||||||||||||||||||||
2016 | 2015 | Dollars | Percent | 2016 | 2015 | Dollars | Percent | |||||||||||||||||||||||||
General and administrative | $ | 1,693,123 | $ | 1,191,879 | $ | 501,244 | 42 | % | $ | 3,135,818 | $ | 3,057,242 | $ | 78,576 | 3 | % |
Three Months Ended June 30, | Change | Six Months Ended June 30, | Change | |||||||||||||||||||||||||||||
2015 | 2014 | Dollars | Percent | 2015 | 2014 | Dollars | Percent | |||||||||||||||||||||||||
Research and development | $ | 7,043 | $ | 9,514 | $ | (2,471 | ) | -26 | % | $ | 9,104 | $ | 11,501 | $ | (2,397 | ) | -21 | % |
Three Months Ended June 30, | Change | Six Months Ended June 30, | Change | |||||||||||||||||||||||||||||
2016 | 2015 | Dollars | Percent | 2016 | 2015 | Dollars | Percent | |||||||||||||||||||||||||
Research and development | $ | 980 | $ | 7,043 | $ | (6,063 | ) | -86 | % | $ | 2,848 | $ | 9,104 | $ | (6,256 | ) | -69 | % |
Three Months Ended June 30, | Change | Six Months Ended June 30, | Change | |||||||||||||||||||||||||||||
2016 | 2015 | Dollars | Percent | 2016 | 2015 | Dollars | Percent | |||||||||||||||||||||||||
Interest expense | $ | 5 | $ | 767 | $ | (762 | ) | -99 | % | $ | 1,512 | $ | 784 | $ | 728 | 93 | % |
Three Months Ended June 30, | Change | Six Months Ended June 30, | Change | |||||||||||||||||||||||||||||
2016 | 2015 | Dollars | Percent | 2016 | 2015 | Dollars | Percent | |||||||||||||||||||||||||
Loss on abandonment of property and equipment | $ | 115,548 | $ | - | $ | 115,548 | 100 | % | $ | 115,548 | $ | - | $ | 115,548 | 100 | % |
Three Months Ended June 30, | Change | Six Months Ended June 30, | Change | |||||||||||||||||||||||||||||
2015 | 2014 | Dollars | Percent | 2015 | 2014 | Dollars | Percent | |||||||||||||||||||||||||
Loss on abandonment of assets | $ | - | $ | - | $ | - | - | % | $ | - | $ | 2,201 | $ | (2,201 | ) | -100 | % |
Exhibit No. | Description | |
10.1 | ||
Charles & Colvard, Ltd. | ||
31.1 | Certification by Chief Executive Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | |
31.2 | Certification by Chief Financial Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | |
32.1 | Certification by Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | |
32.2 | Certification by Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | |
101 | The following materials from Charles & Colvard, Ltd.’s Quarterly Report on Form 10-Q for the quarter ended June 30, |
CHARLES & COLVARD, LTD. | ||
By: | /s/ | |
August | ||
President and Chief Executive Officer | ||
By: | /s/ Kyle S. Macemore | |
August | Kyle S. Macemore | |
Senior Vice President and Chief Financial Officer | ||
(Principal Financial Officer and Chief Accounting Officer) |
Exhibit No. | Description | |
10.1 | ||
Charles & Colvard, Ltd. | ||
Certification by Chief Executive Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | ||
Certification by Chief Financial Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | ||
Certification by Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | ||
Certification by Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | ||
101 | The following materials from Charles & Colvard, Ltd.’s Quarterly Report on Form 10-Q for the quarter ended June 30, |